Cryptocurrency Algorithm — A Generalized Concept
Each cryptocurrency uses in its structure a specific encryption mechanism — an algorithm. It is the decryption of the algorithm that ensures the overall functioning of the blockchain system. Providing their computing power, miners find new blockchain blocks, thereby helping to process transactions, and receive rewards in the form of coins.
Mining algorithms are different, now there are already more than twenty-nine types of them. We don’t see any sense in talking about all the existing cryptocurrency algorithms in detail, because some of them are used only on very young, or not popular cryptosystems. This will only overload the article and complicate the perception of information. Instead, we will focus on the most popular and best mining algorithms.
How to choose a mining algorithm is not an easy question, and it may require an analysis of many factors. Therefore, let’s, first of all, create a list of the most popular algorithms that are now used in the most famous cryptocurrencies.
- SHA256 is one of the oldest algorithms to date, which is used on the well-known Bitcoin and a number of its clones. Of the minuses of this algorithm, we can name the fact that soon owners of specialized ASIC systems can completely monopolize mining based on this algorithm and completely push home “farmers” out of the market.
- Scrypt — Litecoin cryptocurrency and several smaller systems are based on this algorithm. A good mining algorithm, which at one time was an excellent alternative to SHA256. But it so happened that now ASIC miners got to this algorithm too.